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July 2 and 7.
MEERASAIBO v. PHILIPPAL.D. G., Mannar, 8,476.
Action for cancellation of fraudulent conveyance—Fraudulent preference.
Plaintiff, an unsatisfied judgment-creditor of' first defendant,sued him and second defendant to have a conveyance of certainlands by first to second defendant cancelled on the ground of fraud.Plaintiff had not seized the lands in execution of his judgment.—
Quaere, whether the action was not premature.
Held, that plaintiff could not succeed in having the conveyancecancelled. What he could at the most ask was that the conveyancebe declared void, and the land declared executable to his judgment.
Fraudulent preference is the preference by an insolvent debtorof a creditor in fraud of his other creditors, and it i6 only a trusteewho represents all the creditors who can ask a Court to declarea transaction to be a fraudulent preference in order that the pro-fessed creditor may be compelled to restore what he has unfairlyacquired to the estate for equal distribution amongst all thecreditors.
r | ~VHK facts of the case appear in the judgment.
Wendt, for appellant.
Sampayo, for respondent.
7th July, 1896. Witheks, J.:—
Plaintiff is the unsatisfied judgment-creditor of the first defend-ant, and he brings this action to have a conveyance of certainlands from his debtor to the second defendant cancelled on theground that this conveyance was made with intent to defraudhim of his just claims and to prevent him from satisfying hisdemands out of the only property which the first defendant hadbefore the conveyance.
The plaintiff did not attempt to seize these lands in executionof his judgment, and I am inclined to doubt whether his actionis not a premature one—whether, in fact, he has a good cause ofaction. In no case, I imagine, could he succeed in having aconveyance from his debtor to a stranger cancelled ; at the mosthe could ask that the conveyance should be declared void, andthat the land should be declared executable to his judgment not-withstanding the conveyance.
The Judge has, however, given judgment for the plaintiff on theground that the aot of sale is a fraudulent preference. Fraudulentpreference is the preference by an insolvent debtor of a creditorin fraud of his other creditors, and it is only a trustee whorepresents all the creditors who can ask a court to declarea transaction to be a fraudulent preference in order that the
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professed creditor may be compelled to restore what he has 1896.unfairly acquired to the estate for equal distribution amongst all Jvly2nndJ.
However, the pronouncement of the Judge that this transactionwas a fraudulent preference may be regarded as a technical mistake.
I do not think, however, that the facts Support the Judge’sfinding that this was a fraudulent transaction, so far as thesecond defendant is concerned.
It is not proved that the Becond defendant intended to defraudthe plaintiff or knew that his purchase was calculated to defraudthe plaintiff. Moreover, it seems to me that there was valuableconsideration for the purchase and sale between the first andsecond defendants.
The second defendant was a creditor of first defendant, and wasin possession of the land as an otti holder or umfructuary mortgagee,and he took- the fruits of the land in lieu of interest on aprincipal sum which was owing to him by first defendant.
He made further advances to the first defendant. Finding,, how-ever, unable to pay the money, the first defendant discharged thedebt by selling the land. The amount of money owing to thesecond defendant was a fair price for the land sold. The DistrictJudge drew up a sort of mortgage debt account between the firstand second defendants, which made it appear as if the seconddefendant was really in debt to the first defendant when he tookthe impeached conveyance. ’
That account was framed on the footing of an ordinary Hngliahmortgage where the mortgagee is in possession of the propertymortgaged. The usufructuary mortgagee is in quite a* differentposition. He has not in the same way to account for his usufruct.
The usufruct is in lieu of interest. It may be little or it may bevery large. He is allowed to keep it without any surplus beingset off against the principal debt. I would set aside the judgmentand dismiss plaintiff’s action with costs.
Lawrte, J.—I agree.
MEERASAIBO v. PHILIPPAL